Deciding on where to put your money at the moment isn’t easy.
The stock market is erratic, property prices have fallen in many areas and inflation has decimated people’s savings for more than two years.
You might think those in the investment management industry have a better understanding of how to thrive under current circumstances.
Each month, This is Money is putting a senior fund or investment manager to task with a number of questions that’ll require them to go out on a limb.
We want to know where they’d invest for the next 10 years and what they would avoid.
In the hot seat: Each month, we put a fund manager to task. This month we spoke to Ben Lofthouse, fund manager at Henderson International Income Trust
We will quiz our willing professional investors on the future of inflation, interest rates and the property market.
Among other things, we will ask them for their views on gold, Tesla and bitcoin.
This week, we spoke to Ben Lofthouse, fund manager at Henderson International Income Trust plc (Hint).
The investment trust has an internationally diversified portfolio of between 50 and 80 companies that are either listed in, registered in, or whose principal business is in countries that are outside the UK.
It aims to provide shareholders with a growing annual dividend, as well as capital appreciation.
1. If you could invest in only one company for the next 10 years, what would it be?
Ben Lofthouse replies: Despite its performance Microsoft remains the funds’ biggest holding. It has got itself in a dominant position in many areas of technology that look set to grow for years.
2. What about for the next 12 months?
The asset management industry is very cheap. We own Amundi in the fund.
If rates are cut and asset prices rally the sector would benefit, but it is not priced for that.
Bet on Microsoft: Ben Lofthouse thinks Microsoft is in a dominant position in many areas of technology and look set to grow for years
3. Which sector are you most excited about?
The technology sector is fascinating. There are lots of cycles, not just artificial intelligence, and some are just starting to pick up.
It is one of the fund’s biggest exposures.
4. What sector would you be avoiding?
Media remains a difficult sector. There is a lot of innovation and disruption. I find it hard to have confidence identifying which value stocks might navigate the changes effectively.
Amundi: If rates are cut and asset prices rally, Lofthouse thinks the asset management sector would benefit – but Amundi is not already priced for that
5. Which country offers the best value for investors?
As a region Asia is fascinating. China has dragged sentiment down but it remains a very vibrant region with a lot of good value stocks.
6. Should investors target growth or value stocks?
Value – the style remains very out of favour and we can’t make sense of some of the valuations of many companies, they are too low.
At the same time the rally in some areas of growth stocks is very narrow, and we can’t make sense of those valuations.
7. Tesla – will it ultimately be boom or bust?
The company is now fully established, very profitable, and is very unlikely to disappear. I do not think it will go bust.
Whether the Tesla share price makes you money is harder to say, because it trades at a much higher valuation than other car makers.
‘Fascinating’ region: Although China has dragged sentiment down, Lofthouse thinks there are plenty of good value stocks in other parts of Asia
8. Is property market ‘safe as houses’ or due a crash?
I don’t think there will be a crash because unemployment is very low despite slow economic growth, so people are able to pay their rent and mortgages.
I think it is likely that prices are dull for a while, like parts of the early 1990s.
Prices are already lagging inflation, so [homeowners] are effectively losing money in real terms, but not in absolute terms, and people can live with that.
9. Should gold form part of everyone’s portfolio?
I like assets that pay you something for holding them, or can grow over time, so have always struggled to recommend gold.
It is doubly hard when interest rates are where they are. But I would not call myself an expert on it.
Tesla is here to stay: According to Lofthouse, the electric car company is now fully established, very profitable, and is very unlikely to disappear or go bust
10. Do you think Brexit has cost the average UK investor?
The UK market seems to have traded at a lower valuation than the rest of the world since Brexit, so possibly yes, some value has been lost for now.
The market could trade 20 per cent higher and still be cheap.
11. Will interest rates return to rock bottom again?
Predicting interest rates is very hard. Most experts at the central banks are wrong most of the time.
I think it is better to invest on the basis they will change and make sure your investment doesn’t rely solely on a rate change assumption.
Having said that I am not convinced anyone at the Bank of England wants to risk taking them sub 1 per cent again so soon after inflation rates went so high so I don’t expect rock bottom rates any time soon.
Not a gold bug: Lofthouse likes assets that pay you something for holding them, or can grow over time, so has struggled to recommend gold
12. Do you think inflation is here to stay?
Similar to the previous answer, best not to invest based on an assumption either way.
If pushed I assume a 2-3 per cent inflation rate on average, as I can’t see enough economic growth to push it higher for longer given current interest rates and demographics.
13. Has the Bank of England done a good job?
With the benefit of hindsight they waited too long to raise rates and have had to raise them very quickly.
I don’t know if I would have been any cleverer. I am not sure selling the bonds they bought when rates were low for a loss is working though, and I would try just letting them mature rather than selling them, whilst cutting rates a bit instead.
14. You inherit £100k tomorrow. What would you do with the money?
It does depend on your time frame for investment, but mine is quite long – so I’d put one third in short-dated Government bonds, which I’d then sell and buy equites if markets fall.
I’d put another third in global equities and the final third in small cap equities.
